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2013 (3) TMI 27 - AT - Central ExciseNon discharge of Excise duty on installation of Digital Local Telephone Exchange Equipment (DLTEE) system at Panihati Telephone Exchange put to use in July, 2002 - confirmation of duty demand and equivalent penalty on the Appellant u/s 11AC of the CEA, 1944 - Appellant is a Government of India Undertaking and provider of telephone services assessee contested against invoking of extended period of limitation - Held that - Department has adduced evidence establishing the fact that even though the Advance Purchase Order(APO) and Purchase Order (PO) were placed on M/s. Alcatel Network Systems India Ltd., but on the basis of a sub-contract clause in the said APO/PO, the entire equipment was sub-contracted to M/s. ITI Ltd. Further, the Department, on investigation, found that not only the equipments supplied by M/s. ITI Ltd., various other parts were also procured by the Appellant and by employing their own engineers, all these equipments were assembled at their site at Panihati. Besides the equipments manufactured by M/s. ITI Ltd. at Bangalore, various other equipments were procured from other units. She has observed that the equipments could not have been entirely manufactured by M/s. Alcatel Network Systems India Ltd. and supplied to the Appellant after payment of appropriate excise duty. The said finding of the adjudicating authority has not been challenged in the present Appeal nor any contrary evidence has been produced thus, it is crystal clear that the Appellant had procured various parts of DLTEE System from different sources including M/s. ITI Ltd., Bangalore, on whom M/s. Alcatel Network Systems India Ltd. had sub-contracted for supply of the said System and the same were assembled at their site by their own engineers. Also, the evidences in the form of statements of the Divisional Engineer and AGM are relevant, as both these employees of the Appellant had clearly agreed/accepted that all these parts were assembled by the engineers of the Appellant at their site resulting into emergence of the said DLTEE. Therefore, the claim of the Appellant that in view of the stipulation in the APO and PO, the DLTEE could not be assembled without necessary training and expertise, being contrary to the evidence, hence, cannot be accepted. As decided in Solid & Correct Engineering Works (2010 (4) TMI 15 - SUPREME COURT) if the attachment to earth is with an intention of affixing the property permanently, then it becomes immovable. On the contrary, if the goods are attached or affixed to earth by way of nuts and bolts to provide a wobble free operation to the machine, such attachment cannot be considered as a permanent attachment, and be called as an immovable property. Applying the said ratio to the facts of the present case, it is find that the Divisional Engineer in his statement dated 01.02.2006 had categorically stated that the DLTEE was screwed by nuts and bolts on the floor to avoid vibration and displacement and the same could be movable after unscrewing. It is commonsense that the DLTEE can easily be shifted to any place from the premises where it is installed, and many a time, these Exchanges are installed in different floors of a multistoried building. Therefore, by affixing the said DLTEE to the floor by nuts and blots would not make it an immovable property and cease to be goods as the intention of affixing it to the floor is not to make it a permanent structure, but to make it functional. Digital Telephone Exchange (DLTEE), as a commodity, is known in the market as the supply of the said product has been tendered and necessary Purchase Orders were also placed on M/s. Alcatel Network Systems India Ltd. for supply of the said System. This indicates that the said Digital Switching System is being bought and sold and therefore, the test of marketability is satisfied in the present case. Since the twin test of movability and marketability, as laid down in Medley Pharmaceuticals Ltd. case 2011 (1) TMI 13 - SUPREME COURT OF INDIA had been satisfied, no hesitation to observe that the product emerged after assembly of various parts at Panihati known as DLTEE, is an excisable goods and leviable to excise duty under Chapter Heading 85.17 of the CETA. As decided in CCE Vs. Fiat India Ltd. 2012 (8) TMI 791 - SUPREME COURT that even if manufactured goods are put to use at the place of its manufacture, in theory as well as in practice the same is leviable to excise duty. This situation of use of goods without its removal from the place of manufacture, is covered through a specific provision prescribed at Explanation-II to Rule 4 of the Central Excise Rules, 2002, as was in force at the material time. Thus as in the instant case, it is not in dispute that after assembly of the said DLTEE by the engineers of the Appellant, the same was tested and handed over for its use on 30.07.2002 also admitted in the statement of Shri Nikhil Kumar Das dated 01.06.2006, an evidence not been contradicted and hence the said DLTEE System could be considered as manufactured and removed on 30.07.2002 and therefore, liable to excise duty on the assessable value determined as per the principles laid down under Sec.4 of CEA,1944. In the present case, there is no doubt that the Exchange had been put to use by the Appellant for rendering telephone lines to the respective customers for their use. Hence, the assessable value is correctly determined under Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. The Appellant have not disputed the cost price adopted for the determination of the value under the said Rule 8 of Valuation Rules,2000. The claim of the Appellant has been found to be incorrect leading to an irresistible inference that the facts were suppressed from the knowledge of the Department, as no excise duty was intended to be paid on the said DLTEE nor any Central Excise registration was taken for manufacture/assembly of the DLTEE System, thus the extended period of limitation is rightly invoked and imposition of penalty justified - in favour of revenue.
Issues Involved:
1. Excisability of the Digital Local Telephone Exchange Equipment (DLTEE) System. 2. Marketability and Movability of the DLTEE System. 3. Determination of the value of the DLTEE System for excise duty purposes. 4. Applicability of extended period of limitation and imposition of penalty. Issue-wise Detailed Analysis: 1. Excisability of the Digital Local Telephone Exchange Equipment (DLTEE) System: The central issue was whether the assembly of various parts of the DLTEE System at the Panihati Telephone Exchange constituted "manufacture" under Section 2(f) of the Central Excise Act, 1944, making it excisable. The Appellant argued that the DLTEE System was supplied by M/s. Alcatel Network Systems India Ltd. and merely assembled on-site, thus not constituting manufacture. However, the evidence showed that the Appellant procured various parts from multiple sources and assembled them using their own engineers. The Tribunal concluded that the assembly of these parts resulted in the manufacture of an excisable good, thus making it subject to excise duty. 2. Marketability and Movability of the DLTEE System: The Appellant contended that the DLTEE System, once assembled and affixed to the ground with nuts and bolts, became immovable and thus not excisable. The Tribunal referred to the Supreme Court judgment in Solid & Correct Engineering Works, which clarified that goods affixed to the ground by nuts and bolts for stability do not become immovable if they can be unbolted and moved. The DLTEE System was found to be movable and marketable, satisfying the twin tests of excisability. The Tribunal also noted that the DLTEE System was known in the market, as evidenced by the tender and purchase orders, thus satisfying the test of marketability. 3. Determination of the value of the DLTEE System for excise duty purposes: The Appellant argued that the value of the DLTEE System could not be determined under Section 4 of the Central Excise Act, 1944, as it was not removed from the place of manufacture. The Tribunal dismissed this argument, citing that excise duty is payable on goods even if they are used at the place of manufacture. The Tribunal referred to the Supreme Court's judgment in Fiat India Ltd., which clarified that excise duty is chargeable on manufactured goods regardless of their removal. The value of the DLTEE System was correctly determined under Section 4(1)(b) of the Central Excise Act, 1944, read with Rule 8 of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000. 4. Applicability of extended period of limitation and imposition of penalty: The Appellant did not advance arguments on the point of limitation during the hearing. However, the Tribunal noted that the Appellant initially claimed that the DLTEE System was duty-paid and merely assembled. Upon investigation, it was found that various parts were procured from multiple sources and assembled by the Appellant's engineers. The Tribunal concluded that the Appellant suppressed material facts, justifying the invocation of the extended period of limitation and the imposition of penalty under Section 11AC of the Central Excise Act, 1944. Conclusion: The Tribunal upheld the Order-in-Original, confirming the demand for excise duty and the imposition of an equivalent penalty on the Appellant. The appeal was dismissed, affirming that the DLTEE System was an excisable good, movable and marketable, and its value was correctly determined for excise duty purposes.
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